All Bookkeeping Articles

Cost of goods sold (COGS) is an accumulation of the direct costs that went into the goods sold by your company. This includes the cost of any materials used in production as well as the cost of labor needed to produce the good. It does not include indirect expenses such as distribution costs and marketing…

When it comes to managing the books of your business, one of the most important decisions you need to make is which accounting method to use. Luckily there are just two options: cash-basis accounting and accrual accounting. With cash-basis accounting, the moment that you pay a bill or receive a check from a customer, you…

Straight line depreciation is the simplest way to calculate an asset’s loss of value (or depreciation) over time. It is used for bookkeeping purposes to spread the cost of an asset evenly over multiple years. It can also be used to calculate income tax deductions, but only for some assets, like nonresidential property, patents and…

Sales tax is a tax you charge to customers when they purchase products or services from you. As a business owner or seller, you are responsible for calculating, collecting, reporting, and remitting sales tax to the appropriate state and local tax authorities. Use tax is a tax that you have to pay if you purchased…

Double declining balance depreciation is a method of depreciation that allows you to expense more depreciation in the early years of the life of an asset and less in later years. This can be beneficial for assets like cars and computers which lose a greater portion of their value in the early years after you…

There are a number of advantages (and a few disadvantages) to becoming an S Corp (and filing S Corp taxes). With S Corp status, your personal assets are protected in case the business is sued. If you are currently an LLC, then you already have this type of protection from a legal standpoint but you…

Form 1120S is the form that S Corps and LLCs taxed as S Corps must complete to report net earnings for the business to the IRS. Similar to a partnership, net earnings pass through to the shareholders of the S corp and are reported on each shareholder’s personal federal tax return. An S Corp must…

Units of production depreciation is a depreciation method that is designed for manufacturing equipment or machinery. It calculates depreciation expense based on the number of products that your machinery or equipment can output each year. Units of production depreciation cannot be used to get a tax deduction. However, it is one of the six methods…

Sum of the years digits depreciation (SYD) is an accelerated depreciation method that lets you expense more of an asset’s cost in the early years of use than its later years. SYD depreciation cannot be used for tax purposes or to calculate your tax deduction. However, it is acceptable for accounting purposes. It is especially…

MACRS stands for “Modified Accelerated Cost Recovery System.” It is the primary depreciation methods for claiming a tax deduction. Accounting software like QuickBooks Online makes it easy to create depreciation schedules. You can track and record your depreciation so that, come tax time, you’ll have accurate records that support your refunds. Click here for a…

When it comes to deducting expenses for a car driven for business purposes, there are two options to choose from. The first option is the standard mileage rate deduction. The standard mileage rate deduction allows a tax deduction based on the total number of miles driven times a set mileage rate (53.5 cents for 2017).…

Depreciation is an income tax deduction that allows you to recover the cost of assets like cars, furniture, and equipment that you purchase and use in your business. Depreciation can also be reported for accounting purposes so that your financial statements accurately reflect your investment in fixed assets. Generally, any fixed asset–a long term asset…

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